<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): December 2, 1998
AMB PROPERTY, L.P.
(Exact name of registrant as specified in its charter)
CALIFORNIA 333-49163 94-3285362
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
505 MONTGOMERY STREET , SAN FRANCISCO, CA 94111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(415) 394-9000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
AMB PROPERTY, L.P.
CURRENT REPORT
ON
FORM 8-K
Item 5. Other Events
Subsequent to September 30, 1998, AMB Property Corporation (the
"Company") has invested approximately $162 million in 40 industrial
buildings aggregating 3.5 million rentable square feet and
approximately $17 million in one retail center comprised of 0.1
million rentable square feet.
The operating properties covered by the attached financial statements
were acquired by AMB Property, L.P. and subsidiaries (the "Operating
Partnership") from unrelated parties between July 31, 1998, and
October 26, 1998. The Company owns a controlling approximate 95.1%
general partnership interest in the Operating Partnership as of
September 30, 1998. The Company is the sole general partner of the
Operating Partnership and has the full, exclusive and complete
responsibility and discretion in the management and control of the
Operating Partnership. Therefore, the Company consolidates the
Operating Partnership for financial reporting purposes. None of the
acquisitions were individually material to Operating Partnership.
Item 7. Financial Statements and Exhibits.
(a) (i) Combined Statements of Revenues and Certain Expenses for the
Amberjack Portfolio
Report of Independent Public Accountants
Combined Statements of Revenues and Certain Expenses for the
Amberjack Portfolio for the period from January 1, 1998 to July
31, 1998, (unaudited) and for the year ended December 31, 1997
Notes to Combined Statements of Revenues and Certain Expenses for the
Amberjack Portfolio for the period from January 1, 1998 to July
31, 1998, (unaudited) and for the year ended December 31, 1997
(ii) Combined Statements of Revenues and Certain Expenses for the
Willow Lake Portfolio
Report of Independent Public Accountants
Combined Statements of Revenues and Certain Expenses for the Willow
Lake Portfolio for the period from January 1, 1998 to September
9, 1998, (unaudited) and for the year ended December 31, 1997
Notes to Combined Statements of Revenues and Certain Expenses for the
Willow Lake Portfolio for the period from January 1, 1998 to
September 9, 1998, (unaudited) and for the year ended December
31, 1997
(iii) Combined Statements of Revenues and Certain Expenses for the
Willow Park Portfolio
Report of Independent Public Accountants
Combined Statements of Revenues and Certain Expenses for the Willow
Park Portfolio for the period from January 1, 1998 to September
24, 1998, (unaudited) and for the year ended December 31, 1997
Notes to Combined Statements of Revenues and Certain Expenses for the
Willow Park Portfolio for the period from January 1, 1998 to
September 24, 1998, (unaudited) and for the year ended December
31, 1997
(iv) Combined Statements of Revenues and Certain Expenses for the
National Distribution Portfolio
Report of Independent Public Accountants
Combined Statements of Revenues and Certain Expenses for the National
Distribution Portfolio for the period from January 1, 1998 to
September 30, 1998, (unaudited) and for the year ended December
31, 1997
2
<PAGE> 3
Notes to Combined Statements of Revenues and Certain Expenses for the
National Distribution Portfolio for the period from January 1,
1998 to September 30, 1998, (unaudited) and for the year ended
December 31, 1997
3
<PAGE> 4
(v) Combined Statements of Revenues and Certain Expenses for the
Mawah Portfolio
Report of Independent Public Accountants
Combined Statements of Revenues and Certain Expenses for the Mawah
Portfolio for the period from January 1, 1998 to September 30,
1998 (unaudited) and for the year ended December 31, 1997
Notes to Combined Statements of Revenues and Certain Expenses for the
Mawah Portfolio for the period from January 1, 1998 to September
30, 1998 (unaudited) and for the year ended December 31, 1997
(b) Pro Forma Financial Information for AMB Property, L.P. (unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998
Notes and adjustments to Pro Forma Condensed Consolidated Balance Sheet as
of September 30, 1998
Pro Forma Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1998
Notes and adjustments to Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1998
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1997
Notes and adjustments to Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1997
4
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the Amberjack Portfolio (as defined in Note 1) for the year ended
December 31, 1997. This financial statement is the responsibility of the
management of the Amberjack Portfolio. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission's rules and regulations, as described in Note 1, and is not
intended to be a complete presentation of the revenues and expenses of the
Amberjack Portfolio.
In our opinion, the combined statement of revenues and certain expenses
referred to above presents fairly, in all material respects, the revenues and
certain expenses of the Amberjack Portfolio for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
July 9, 1998
5
<PAGE> 6
AMBERJACK PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JANUARY 1, 1998 TO JULY 31, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------ ------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues $9,509 $5,908
Other income 18 16
------ ------
9,527 5,924
CERTAIN EXPENSES
Property operating expenses 1,898 988
Real estate taxes 1,244 1,163
------ ------
3,142 2,151
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES $6,385 $3,773
====== ======
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
6
<PAGE> 7
AMBERJACK PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying combined statements of revenues and certain expenses
include the combined operations (see "Basis of Presentation" below) of the
Amberjack Portfolio (the "Portfolio"). AMB Property Corporation and
Subsidiaries (the "Company") acquired the Portfolio, which includes 44
industrial buildings aggregating approximately 2.1 million square feet
(unaudited), from an unrelated party on July 31, 1998 for an initial purchase
price of approximately $78,500 (unaudited).
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to the
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
The combined statements of revenues and certain expenses have been prepared
for the purpose of complying with Rule 3-14 of the Securities and Exchange
Commission's rules and regulations.
The financial information presented for the period from January 1, 1998 to
July 31, 1998 is unaudited. In the opinion of management, the unaudited
financial information contains all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the combined statement of
revenues and certain expenses for the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates.
2. LEASING ACTIVITY
Future minimum rental income due under non-cancelable operating leases with
tenants in effect as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
1998............................................................... $ 7,564
1999............................................................... 5,376
2000............................................................... 3,599
2001............................................................... 2,522
2002............................................................... 1,386
Thereafter......................................................... 1,169
---------
Total.................................................... $ 21,616
=========
</TABLE>
7
<PAGE> 8
AMBERJACK PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY (CON'T)
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $1,287
and $776 for the year ended December 31, 1997 and for the period from January 1,
1998 to July 31, 1998 (unaudited), respectively. Certain leases contain options
to renew.
8
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the Willow Lake Portfolio (as defined in Note 1) for the year ended
December 31, 1997. This financial statement is the responsibility of the
management of the Willow Lake Portfolio. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission's rules and regulations, as described in Note 1, and is not
intended to be a complete presentation of the revenues and expenses of the
Willow Lake Portfolio.
In our opinion, the combined statement of revenues and certain expenses
referred to above presents fairly, in all material respects, the revenues and
certain expenses of the Willow Lake Portfolio for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
July 21, 1998
9
<PAGE> 10
WILLOW LAKE PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JANUARY 1, 1998 TO SEPTEMBER 9, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
-------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................... $ 6,249 $ 4,493
Other income.............................. 19 8
-------- -------
6,268 4,501
CERTAIN EXPENSES
Property operating expenses............... 760 457
Real estate taxes......................... 716 569
-------- -------
1,476 1,026
-------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...... $ 4,792 $ 3,475
======== =======
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
10
<PAGE> 11
WILLOW LAKE PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTIES ACQUIRED
The accompanying combined statements of revenues and certain expenses
include the operations of the Willow Lake Portfolio (the "Portfolio") acquired
by AMB Property Corporation and Subsidiaries (the "Company") from an unrelated
party on September 9, 1998 for an initial purchase price of approximately
$60,500 (unaudited), which includes the assumption of mortgages payable (see
Note 3). The Portfolio is located in the Memphis and Nashville, Tennessee and
includes 12 industrial buildings comprising approximately 1.4 million rentable
square feet (unaudited).
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to the
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
The combined statements of revenues and certain expenses have been prepared
for the purpose of complying with Rule 3-14 of the Securities and Exchange
Commission's rules and regulations.
The financial information presented for the period from January 1, 1998 to
September 9, 1998 is unaudited. In the opinion of management, the unaudited
financial information contains all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the combined statement of
revenues and certain expenses for the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates.
2. LEASING ACTIVITY
Future minimum rental income due under non-cancelable operating leases with
tenants in effect as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1998.......................................................... $ 6,423
1999.......................................................... 5,694
2000.......................................................... 4,547
2001.......................................................... 3,276
2002.......................................................... 1,315
Thereafter.................................................... 2,798
---------
Total............................................... $ 24,053
=========
</TABLE>
11
<PAGE> 12
WILLOW LAKE PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY (CON'T)
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $798 and
$423 for the year ended December 31, 1997 and for the period from January 1,
1998 to September 9, 1998 (unaudited), respectively. Certain leases contain
options to renew.
3. MORTGAGES PAYABLE
In connection with the purchase of the Portfolio, the Company assumed
certain mortgages payable with an aggregate principal value of $38,055 as of
December 31, 1997. The mortgages payable require monthly principal and interest
payments and are secured by deeds of trust on certain of the Portfolio
properties. The mortgages payable bear interest at fixed rates ranging from
7.87% to 9.00% and are due between October 2002 and January 2011. The mortgages
payable have various financial and non-financial covenants. The weighted-average
fixed interest rate on this secured debt at December 31, 1997 was 8.10%.
The scheduled maturities of the mortgages as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
1998................................................ $ 121
1999................................................ 511
2000................................................ 555
2001................................................ 602
2002................................................ 9,241
Thereafter.......................................... 27,025
---------
Total..................................... $ 38,055
=========
</TABLE>
12
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the Willow Park Portfolio (as defined in Note 1) for the year ended
December 31, 1997. This financial statement is the responsibility of the
management of the Willow Park Portfolio. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission's rules and regulations, as described in Note 1, and is not
intended to be a complete presentation of the revenues and expenses of the
Willow Park Portfolio.
In our opinion, the combined statement of revenues and certain expenses
referred to above presents fairly, in all material respects, the revenues and
certain expenses of the Willow Park Portfolio for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
June 8, 1998
13
<PAGE> 14
WILLOW PARK PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JANUARY 1, 1998 TO SEPTEMBER 24, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
--------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................... $ 10,119 $ 9,610
CERTAIN EXPENSES
Property operating expenses............... 443 328
Real estate taxes......................... 1,770 1,649
--------- -------
2,213 1,977
--------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...... $ 7,906 $ 7,633
========= =======
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
14
<PAGE> 15
WILLOW PARK PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying combined statements of revenues and certain expenses
include the operations of the Willow Park Portfolio (the "Portfolio") acquired
by AMB Property Corporation and Subsidiaries (the "Company") from an unrelated
party on September 24, 1998 for an initial purchase price of approximately
$100,400 (unaudited), including the assumption of mortgages payable (see Note
3). The Portfolio is located in the San Francisco Bay Area and includes 21
industrial buildings comprising approximately 1.0 million rentable square feet
(unaudited).
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to the
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
The combined statements of revenues and certain expenses have been prepared
for the purpose of complying with Rule 3-14 of the Securities and Exchange
Commission's rules and regulations.
The combined financial information presented for the period from January 1,
1998 to September 24, 1998 is unaudited. In the opinion of management, the
unaudited financial information contains all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the combined statement
of revenues and certain expenses for the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates.
2. LEASING ACTIVITY
Future minimum rental income due under non-cancelable operating leases with
tenants in effect as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1998...................................................... $ 8,707
1999...................................................... 8,291
2000...................................................... 7,579
2001...................................................... 6,976
2002...................................................... 5,358
Thereafter................................................ 3,387
---------
Total........................................... $ 40,298
=========
</TABLE>
15
<PAGE> 16
WILLOW PARK PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY (CON'T)
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $1,589
and $1,717 for the year ended December 31, 1997 and for the period from January
1, 1998 to September 24, 1998 (unaudited), respectively. Certain leases contain
options to renew.
3. MORTGAGES PAYABLE
In connection with the purchase of the Portfolio, the Company assumed
certain mortgages payable with an aggregate principal value of $33,451 as of
December 31, 1997. The mortgages payable require monthly principal and interest
payments and are secured by deeds of trust on certain of the Portfolio
properties. The mortgages payable bear interest at rates ranging from 7.85% to
8.59% and are due between August 2000 and May 2007. The mortgages payable have
various financial and non-financial covenants. The weighted-average fixed
interest rate on secured debt at December 31, 1997 was 8.33%.
The scheduled maturities of the mortgages payable as of December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998...................................................... $ 366
1999...................................................... 1,793
2000...................................................... 7,455
2001...................................................... 910
2002...................................................... 998
Thereafter................................................ 21,929
---------
Total........................................... $ 33,451
=========
</TABLE>
16
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the National Distribution Portfolio (as defined in Note 1) for the
year ended December 31, 1997. This financial statement is the responsibility of
the management of the National Distribution Portfolio. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission's rules and regulations, as described in Note 1, and is not
intended to be a complete presentation of the revenues and expenses of the
National Distribution Portfolio.
In our opinion, the combined statement of revenues and certain expenses
referred to above presents fairly, in all material respects, the revenues and
certain expenses of the National Distribution Portfolio for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
July 31, 1998
17
<PAGE> 18
NATIONAL DISTRIBUTION PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JANUARY 1, 1998 TO SEPTEMBER 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
--------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................... $ 8,633 $ 7,433
Other income.............................. 47 36
--------- -------
8,680 7,469
CERTAIN EXPENSES
Property operating expenses............... 811 878
Real estate taxes......................... 1,116 804
--------- -------
1,927 1,682
REVENUES IN EXCESS OF CERTAIN EXPENSES...... $ 6,753 $ 5,787
========= =======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
18
<PAGE> 19
NATIONAL DISTRIBUTION PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying combined statements of revenues and certain expenses
include the operations (see "Basis of Presentation" below) of the National
Distribution Portfolio (the "Portfolio"). AMB Property Corporation (the
"Company") acquired the Portfolio, which includes 24 industrial buildings
aggregating 2.2 million square feet (unaudited), from an unrelated party on
October 26, 1998 for an initial purchase price of approximately $92,500
(unaudited), which includes the assumption of mortgages payable (see Note 3).
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Portfolio for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Portfolio;
however, the Company is not aware of any material factors relating to the
Portfolio that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Portfolio.
The combined statements of revenues and certain expenses have been prepared
for the purpose of complying with Rule 3-14 of the Securities and Exchange
Commission's rules and regulations.
The financial information presented for the nine months ended September 30,
1998 is unaudited. In the opinion of management, the unaudited financial
information contains all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the combined statement of revenues and
certain expenses for the Portfolio.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates.
2. LEASING ACTIVITY
Future minimum rental income due under non-cancelable operating leases with
tenants in effect as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ---------
<S> <C>
1998...................................................... $ 8,298
1999...................................................... 7,807
2000...................................................... 5,897
2001...................................................... 4,470
2002...................................................... 3,167
Thereafter................................................ 5,747
---------
Total........................................... $ 35,386
=========
</TABLE>
19
<PAGE> 20
NATIONAL DISTRIBUTION PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY (CON'T)
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $1,010
and $926 for the year ended December 31, 1997 and for the nine months ended
September 30, 1998 (unaudited), respectively. Certain leases contain options to
renew.
3. MORTGAGES PAYABLE
In connection with the purchase of the Portfolio, the Company assumed
certain mortgages payable with an aggregate principal value of $28,991 as of
December 31, 1997. The mortgages payable require monthly principal and interest
payments and are secured by deeds of trust on certain of the Portfolio
properties. The mortgages payable bear interest at rates ranging from 7.20% to
8.45% and are due between January 2003 and December 2007. The mortgages payable
have various financial and non-financial covenants. The weighted-average fixed
interest rate on secured debt at December 31, 1997 was 7.97%.
The scheduled maturities of the mortgages payable as of December 31, 1997
are as follows:
<TABLE>
<S> <C>
1998...................................................... $ 577
1999...................................................... 625
2000...................................................... 677
2001...................................................... 733
2002...................................................... 794
Thereafter................................................ 25,585
---------
Total........................................... $ 28,991
=========
</TABLE>
20
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AMB Property Corporation:
We have audited the accompanying combined statement of revenues and certain
expenses of the Mawah Portfolio (as defined in Note 1) for the year ended
December 31, 1997. This financial statement is the responsibility of the
management of the Mawah Portfolio. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall combined financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission's rules and regulations, as described in Note 1, and is not
intended to be a complete presentation of the revenues and expenses of the Mawah
Portfolio.
In our opinion, the combined statement of revenues and certain expenses
referred to above presents fairly, in all material respects, the revenues and
certain expenses of the Mawah Portfolio for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
July 31, 1998
21
<PAGE> 22
MAWAH PORTFOLIO
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JANUARY 1, 1998 TO SEPTEMBER 30, 1998 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
-------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental revenues........................... $ 4,094 $ 3,111
Other income.............................. 293 171
-------- -------
4,387 3,282
CERTAIN EXPENSES
Property operating expenses............... 195 131
Real estate taxes......................... 190 143
-------- -------
385 274
-------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES...... $ 4,002 $ 3,008
======== =======
</TABLE>
The accompanying notes are an integral part
of these combined financial statements.
22
<PAGE> 23
MAWAH PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Properties Acquired
The accompanying combined statements of revenues and certain expenses
include the combined operations (see "Basis of Presentation" below) of the Mawah
Portfolio (the "Property"). AMB Property Corporation and Subsidiaries (the
"Company") acquired the Property from an unrelated party on October 8, 1998 for
an initial purchase price of approximately $41,900 (unaudited). The Property is
located in Mawah, New Jersey, and includes seven industrial buildings
aggregating 579,029 rentable square feet (unaudited).
Basis of Presentation
The accompanying combined statements of revenues and certain expenses are
not representative of the actual operations of the Property for the periods
presented. Certain expenses may not be comparable to the expenses expected to be
incurred by the Company in the proposed future operations of the Property;
however, the Company is not aware of any material factors relating to the
Property that would cause the reported financial information not to be
indicative of future operating results. Excluded expenses consist of interest,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
The combined statements of revenues and certain expenses have been prepared
for the purpose of complying with Rule 3-14 of the Securities and Exchange
Commission's rules and regulations.
The financial information presented for the nine months ended September 30,
1998 is not audited. In the opinion of management, the unaudited financial
information contains all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the combined statement of revenues and
certain expenses for the Property.
Revenue Recognition
All leases are classified as operating leases, and rental revenue is
recognized on a straight-line basis over the terms of the leases.
Uses of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
periods presented. Actual results could differ from those estimates.
2. LEASING ACTIVITY
Future minimum rental income due under non-cancelable operating leases with
tenants in effect as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
1998............................................................... $ 4,031
1999............................................................... 4,128
2000............................................................... 4,044
2001............................................................... 3,964
2002............................................................... 3,889
Thereafter......................................................... 11,165
---------
Total.................................................... $ 31,221
=========
</TABLE>
23
<PAGE> 24
MAWAH PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS)
2. LEASING ACTIVITY (CON'T)
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $293 and
$171 for the year ended December 31, 1997 and for the nine months ended
September 30, 1998 (unaudited), respectively. Certain leases contain options to
renew.
24
<PAGE> 25
AMB PROPERTY, L.P.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
BACKGROUND
The accompanying unaudited pro forma condensed consolidated balance sheet
as of September 30, 1998 has been prepared to reflect: (i) the acquisition of
properties subsequent to September 30, 1998, (ii) the sale of Series B Preferred
Units and the application of the net proceeds therefrom and (iii) the sale of
Series C Preferred Units and the application of the net proceeds therefrom as if
such transactions and adjustments had occurred on September 30, 1998. The
accompanying unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 1997 and the nine months ended September 30,
1998 have been prepared to reflect: (i) the incremental effect of the
acquisition of properties during 1998 and 1997, (ii) the incremental effect of
the disposition or partial disposition of properties during 1997, (iii) the IPO
and Formation Transactions by the Company, (iv) pro forma debt and other
adjustments resulting from the sale of Senior Debt Securities, the sale of
Series A Preferred Shares by the Company, the sale of Series B Preferred Units
and the sale of Series C Preferred Units and the application of the resulting
net proceeds and (v) certain other adjustments as if such transactions and
adjustments had occurred on January 1, 1997 and were carried forward through
September 30, 1998.
These unaudited pro forma condensed consolidated statements should be read
in connection with AMB Property, L.P.'s December 31, 1997 and September 30, 1998
historical consolidated financial statements and notes thereto. In the opinion
of management, the pro forma condensed consolidated financial information
provides for all adjustments necessary to reflect the effects of the IPO and
Formation Transactions, the sale of Senior Debt Securities, the sale of Series A
Preferred Shares, the sale of Series B Preferred Units and the sale of Series C
Preferred Units and the application of the resulting net proceeds therefrom,
property acquisitions and dispositions and certain other transactions.
The pro forma information is unaudited and is not necessarily indicative of
the consolidated results that would have occurred if the transactions and
adjustments reflected therein had been consummated in the period or on the date
presented, or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods.
25
<PAGE> 26
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED
OPERATING PROPERTY UNIT
PARTNERSHIP(1) ACQUISITIONS(2) OFFERINGS(3) PRO FORMA
-------------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Investments in real estate, net $3,247,217 $ 190,628 $ -- $3,437,845
Cash and cash equivalents 33,206 (7,294) -- 25,912
Other assets 46,850 -- -- 46,850
---------- ---------- ---------- ----------
Total assets $3,327,273 $ 183,334 $ -- $3,510,607
========== ========== ========== ==========
LIABILITIES AND PARTNERS'
CAPITAL
Secured debt $ 701,602 $ 52,068 $ -- $ 753,670
Unsecured credit facilities 205,000 119,633 (169,825) 154,808
Senior debt securities 400,000 -- -- 400,000
Other liabilities 109,606 -- -- 109,606
---------- ---------- ---------- ----------
Total liabilities 1,416,208 171,701 (169,825) 1,418,084
---------- ---------- ---------- ----------
Minority interests 57,916 11,633 106,750 176,299
---------- ---------- ---------- ----------
Partners' Capital
Series A Preferred Units 96,100 -- -- 96,100
Series B Preferred Units -- -- 63,075 63,075
General Partner 1,670,576 -- -- 1,670,576
Limited Partners 86,473 -- -- 86,473
---------- ---------- ---------- ----------
Total partners' capital 1,853,149 -- -- 1,916,224
---------- ---------- ---------- ----------
Total liabilities and
partners' capital $3,327,273 $ 183,334 $ -- $3,510,607
========== ========== ========== ==========
</TABLE>
26
<PAGE> 27
AMB PROPERTY, L.P.
NOTES AND ADJUSTMENTS TO PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
1. Reflects the historical consolidated balance sheet of AMB Property, L.P.
(the "Operating Partnership") as of September 30, 1998. See the historical
consolidated financial statements and notes thereto included in AMB Property
L.P.'s September 30, 1998 Form 10-Q.
2. Reflects property acquisitions subsequent to September 30, 1998 for an
estimated total purchase price of approximately $190,628, including estimated
acquisition costs. The Operating Partnership has funded these acquisitions
through (i) borrowings under its Credit Facility of approximately $119,633 (ii)
cash on hand of approximately $7,294, (iii) the assumption of approximately
$52,068 in secured debt and (iv) joint venture co-investment contributions of
$11,633. Property acquisitions include the following properties:
<TABLE>
<CAPTION>
PROPERTY NAME ACQUISITION PRICE
- ------------- ------------------
<S> <C>
Porete Avenue Warehouse.......................... $ 15,624
Mawah Portfolio.................................. 41,876
National Distribution Portfolio.................. 92,465
South Point Business Park........................ 23,266
Around Lenox..................................... 17,397
----------
$ 190,628
==========
</TABLE>
3. Reflects the effect of (i) the sale of Series B Preferred Units by AMB
Property, L.P. (the "Operating Partnership") in the amount of $65,000, resulting
in net proceeds of approximately $63,075 after payment of approximately $1,925
of offering and commission costs, (ii) the sale of Series C Preferred Units by
AMB Property II, L.P. (owned 99% by the Operating Partnership and 1% by a wholly
owned subsidiary of the Company) in the amount of $110,000, resulting in net
proceeds of approximately $106,750 after payment of approximately $3,250 of
offering and commission costs and (iii) the repayment of borrowings under the
Credit Facility of approximately $169,825 using the net proceeds of the sale of
the Series B Preferred Units and Series C Preferred Units.
27
<PAGE> 28
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OPERATING 1998 PROPERTY PREFERRED
PARTNERSHIP(1) ACQUISITIONS(2) OFFERINGS(3) PRO FORMA
-------------- --------------- ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Rental revenue.............................. $ 251,844 $ 51,071 $ -- $ 302,915
Interest and other income................... 3,016 2,988 -- 6,004
------------ ------------ ------------ ------------
Total revenues.................... 254,860 54,059 -- 308,919
------------ ------------ ------------ ------------
OPERATING EXPENSES
Real estate taxes and property operating
expenses.................................. 67,637 11,723 -- 79,360
Interest expense............................ 47,105 -- 19,207 66,312
Depreciation and amortization............... 40,052 7,507 -- 47,559
General, administrative and other........... 8,694 -- -- 8,694
------------ ------------ ------------ ------------
Total operating expenses.......... 163,488 19,230 19,207 201,925
------------ ------------ ------------ ------------
Income from operations before minority
interests................................. 91,372 34,829 (19,207) 106,994
Minority interests' share of net
income.................................... (3,085) (2,384) (7,218) (12,687)
------------ ------------ ------------ ------------
Net income........................ 88,287 32,445 (26,425) 94,307(4)
Preferred unit distributions................ (1,514) -- (9,066) (10,580)
------------ ------------ ------------ ------------
Net income available to common
unitholders............................... $ 86,773 $ 32,445 $ (35,491) $ 83,727
============ ============ ============ ============
Net income per common unit
Basic..................................... $ 0.97 $ 0.93
============ ============
Diluted................................... $ 0.97 $ 0.93
============ ============
Weighted average common units outstanding
Basic..................................... 89,214,581 90,322,352
============ ============
Diluted................................... 89,188,352 90,699,696
============ ============
</TABLE>
28
<PAGE> 29
AMB PROPERTY, L.P.
NOTES AND ADJUSTMENTS TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. Reflects the historical consolidated operations of AMB Property, L.P.
(the "Operating Partnership") for the nine months ended September 30, 1998.
See the historical consolidated financial statements and notes thereto included
in AMB Property, L.P's September 30, 1998 Form 10-Q.
2. The following reflects the incremental effects of properties acquired
subsequent to December 31, 1997 based on the historical operations of such
properties for the periods prior to acquisition by the Operating Partnership:
<TABLE>
<CAPTION>
REAL ESTATE TAXES REVENUES IN
AND PROPERTY EXCESS OF
RENTAL AND OPERATING CERTAIN
OTHER REVENUES EXPENSES EXPENSES
-------------- ----------------- -----------
<S> <C> <C> <C>
Cascade............................ $ 44 $ (11) $ 33
Wilsonville........................ 167 (41) 126
Atlanta South Phase II............. 116 (30) 86
Boston Industrial Portfolio........ 2,853 (108) 2,745
Mansfield Industrial Portfolio..... 71 (2) 69
Orlando Central Park............... 804 (260) 544
Jamesburg Property................. 1,466 (543) 923
Corporate Park Industrial.......... 757 (130) 627
Minneapolis Industrial Portfolio... 592 (230) 362
Houston Service Center............. 706 (249) 457
Meadowridge Business Park.......... 1,058 (238) 820
Northwest Business Center.......... 323 (75) 248
Forbes............................. -- -- --
Southfield......................... -- -- --
Crysen Corridor Warehouse.......... 247 (63) 184
Garland Industrial Portfolio....... 1,966 (412) 1,554
Suffolk............................ 165 (42) 123
Minnetonka Industrial Portfolio.... 2,022 (768) 1,254
Alsip Industrial................... 374 (106) 268
Suffolk Industrial................. 444 (112) 332
Chemway Industrial................. 688 (140) 548
Amberjack Portfolio................ 5,924 (2,151) 3,773
Willow Lake Portfolio.............. 4,501 (1,026) 3,475
Willow Park Portfolio.............. 9,610 (1,977) 7,633
Porete Avenue Warehouse............ 1,318 (263) 1,055
Mawah Portfolio.................... 3,282 (274) 3,008
National Distribution Portfolio.... 7,469 (1,682) 5,787
South Point Business Park.......... 1,764 (170) 1,594
Northridge......................... 108 (43) 65
Totem Lake Malls................... 758 (277) 481
Around Lenox....................... 1,474 (300) 1,174
------- -------- -------
$51,071 $(11,723) $39,348
======= ======== =======
</TABLE>
29
<PAGE> 30
Five of the property acquisitions, Jamesburg Property, Corporate Park
Industrial, Garland Industrial Portfolio, Minnetonka Industrial Portfolio and
South Point Business Park, represent a joint venture with a client of AMB
Investment Management in which the Operating Partnership owns a controlling
50.0005% interest. The joint venture acquisitions are accounted for on a
consolidated basis and, accordingly, minority interest of $2,384 has been
reflected relative to these acquisitions.
Two of the acquisitions above, Forbes and Southfield, represent the
purchase of vacant buildings which are in the process of being leased. As such,
no property operations have been reflected in the accompanying pro forma
statement of operations relative to these acquisitions.
Also reflects the acquisition of a non-controlling unconsolidated limited
partnership interest in an existing real estate joint venture which owns the
DuPage Elk Grove Property. As such, the Operating Partnership's incremental
share of equity in earnings of this joint venture of $2,988 is included in
interest and other income in the accompanying pro forma statement of operations.
Also reflects the estimated incremental depreciation and amortization of
the 1998 property acquisitions based on estimated useful lives of 40 years.
3. Reflects an adjustment to derive pro forma interest expense, which is
based upon the pro forma debt balances as of September 30, 1998. The calculation
of pro forma interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, pro forma balance of $737,752 (before premium of
$15,918), assumed interest rate of 7.90%........................... $ 43,712
Credit Facility, pro forma balance of $154,808, assumed interest
rate of 6.53%...................................................... 7,582
Senior Debt Securities, pro forma balance of $400,000, weighted
average interest rate of 7.175%.................................... 21,525
Amortization of debt premium, actual amounts amortized during the
period............................................................. (2,664)
Amortization of deferred financing costs, $6,434 balance, 3 to 17
year terms......................................................... 743
Unused Credit Facility fees, unused pro forma balance of $345,192,
fee of 0.15%....................................................... 388
Capitalized interest, actual amounts capitalized during the
period............................................................. (4,974)
---------
Pro forma interest expense........................................... $ 66,312
=========
</TABLE>
The net change in interest expense is the result of the repayment of
borrowings on the Credit Facility of approximately $394,466 with the net
proceeds from the sale of the Senior Debt Securities (see below) and
approximately $267,000 from the sale of Series A Preferred Shares, the sale of
Series B Preferred Units and sale of the Series C Preferred Units offset by
borrowings on the Credit Facility related to property acquisitions and the
assumption of secured debt in connection with property acquisitions.
In June 1998, the Operating Partnership issued $400,000 aggregate principal
amount of unsecured notes ("Senior Debt Securities") in an underwritten public
offering, of which the net proceeds of approximately $394,466 were contributed
to the Operating Partnership and used to repay amounts outstanding under the
Credit Facility. The Senior Debt Securities mature in June 2008. June 2015 and
June 2018 and bear interest at a weighted average rate of 7.18%.
Also reflects the payment of pro forma Series A Preferred Stock dividends
at a dividend rate of 8.5%, Series B Preferred Unit distributions at a
distribution rate of 8.625% and Series C Preferred Unit distributions at a
distribution rate of 8.75%.
4. The pro forma taxable income of the Operating Partnership for the twelve
months ended September 30, 1998 is approximately $108,919, which is based upon
pro forma income from operations of approximately $115,847, plus book
30
<PAGE> 31
depreciation and amortization of approximately $58,401 less other book/tax
differences of approximately $7,409 and less tax depreciation and amortization
of approximately $57,920
31
<PAGE> 32
AMB PROPERTY, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
AMB
OPERATING CONTRIBUTED 1997 PROPERTY 1997 PROPERTY
PARTNERSHIP(1) PROPERTIES(2) ACQUISITIONS(3) DISPOSITIONS(4)
-------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Rental revenue $ 26,465 $ 207,391 $ 47,554 $ (1,200)
Interest and other income 645 1,217 176 --
------------ ------------ ------------ ------------
Total revenues 27,110 208,608 47,730 (1,200)
------------ ------------ ------------ ------------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses 8,899 72,452 10,815 (363)
Interest expense 3,528 45,009 -- (75)
Depreciation and
amortization 4,195 32,616 -- (157)
General, administrative and
other 1,197 823 -- --
------------ ------------ ------------ ------------
Total operating
expenses 17,819 150,900 10,815 (595)
------------ ------------ ------------ ------------
Income from operations before
disposal of real estate and
minority interests 9,291 57,708 36,915 (605)
Gain on disposal of real
estate -- 360 -- (360)
------------ ------------ ------------ ------------
Income from operations before
minority interests 9,291 58,068 36,915 (965)
Minority interests' share of
net income (117) (884) (296) --
------------ ------------ ------------ ------------
Net income 9,174 57,184 36,619 (965)
Preferred Unit distributions -- -- -- --
------------ ------------ ------------ ------------
Net income available to
common unitholders $ 9,174 $ 57,184 $ 36,619 $ (965)
============ ============ ============ ============
Net income per common unit
Basic $ 0.10
============
Diluted $ 0.10
============
Weighted average common shares
outstanding
Basic 88,416,676
============
Diluted 88,698,719
============
</TABLE>
<TABLE>
<CAPTION>
IPO AND
FORMATION 1997 AS 1998 PROPERTY PREFERRED
TRANSACTIONS(5) ADJUSTED ACQUISITIONS(6) OFFERINGS(7) PRO FORMA
--------------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental revenue $ 2,455 $ 282,665 $ 100,261 $ -- $ 382,926
Interest and other income (29) 2,009 5,086 -- 7,095
------------ ------------ ------------ ------------ ------------
Total revenues 2,426 284,674 105,347 -- 390,021
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Real estate taxes and
property operating
expenses (10,325) 81,478 24,508 -- 105,986
Interest expense (3,033) 45,429 -- 46,076 91,505
Depreciation and
amortization 9,232 45,886 15,674 -- 61,560
General, administrative and
other 5,958 7,978 -- -- 7,978
------------ ------------ ------------ ------------ ------------
Total operating
expenses 1,832 180,771 40,182 46,076 267,029
------------ ------------ ------------ ------------ ------------
Income from operations before
disposal of real estate and
minority interests 594 103,903 65,165 (46,076) 122,992
Gain on disposal of real
estate -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Income from operations before
minority interests 594 103,903 65,165 (46,067) 122,992
Minority interests' share of
net income (--) (1,297) (5,996) (10,125) (17,418)
------------ ------------ ------------ ------------ ------------
Net income 594 102,606 59,169 (56,201) 105,574
Preferred Unit distributions -- -- (14,106) (14,106)
------------ ------------ ------------ ------------ ------------
Net income available to
common unitholders $ 594 $ 102,606 $ 59,169 $ (70,307) $ 91,468
============ ============ ============ ============ ============
Net income per common unit
Basic $ 1.16 $ 1.03
============ ============
Diluted $ 1.16 $ 1.03
============ ============
Weighted average common shares
outstanding
Basic 88,416,676 88,416,676
============ ============
Diluted 88,698,719 88,698,719
============ ============
</TABLE>
32
<PAGE> 33
AMB PROPERTY, L.P.
NOTES AND ADJUSTMENTS TO PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. Reflects the historical consolidated operations of the Operating
Partnership for the period from November 26, 1997 to December 31, 1997 and the
historical operations of AMB Institutional Realty Advisors, Inc. ("AMB") for the
period January 1, 1997 to November 25, 1997. See the Operating Partnership's
December 31, 1997 historical consolidated financial statements and notes thereto
included in the Company's December 31, 1997, Form 10-K.
2. Reflects the historical combined operations of the AMB Contributed
Properties for the period from January 1, 1997 to November 25, 1997.
3. Reflects the incremental effects of properties acquired during the year
ended December 31, 1997 based on the historical operations of such properties
for periods prior to acquisition by the Operating Partnership or the owners of
the AMB Contributed Properties. Below is a summary of the incremental effect of
such properties:
<TABLE>
<CAPTION>
REAL ESTATE
TAXES AND
PROPERTY REVENUES IN
RENTAL OPERATING EXCESS OF
PROPERTY ACQUIRED REVENUES EXPENSES CERTAIN EXPENSES
- ----------------- ---------- ------------ ----------------
<S> <C> <C> <C>
Shady Oak................................... $ 326 $ (70) $ 256
Metric Center............................... 635 (50) 585
Southfield.................................. 171 (40) 131
Atlanta South Phase II...................... 109 (57) 52
O'Hare Industrial Portfolio
(Ardmore)................................. 265 (74) 191
Windsor Court............................... 151 (53) 98
Beacon Building 8........................... 765 (180) 585
Greenleaf................................... 177 (74) 103
Boulden..................................... 1,070 (269) 801
Mid-Atlantic Business Center................ 1,537 (414) 1,123
Brittania Business Park..................... 1,058 (212) 846
Rockford Road............................... 64 (6) 58
Patuxent.................................... 509 (113) 396
Executive................................... 588 (175) 413
Acer Distribution........................... 716 (129) 587
Cabot Industrial Portfolio.................. 22,995 (4,775) 18,220
Cabot Business Park......................... 4,734 (895) 3,839
Manhattan Village........................... 5,467 (1,928) 3,539
Weslayan Plaza.............................. 3,259 (990) 2,269
Silicon Valley R&D Portfolio................ 2,958 (311) 2,647
--------- --------- -------
$ 47,554 $ (10,815) $36,739
========= ========= =======
</TABLE>
One of the acquisitions above, Manhattan Village, represents the
acquisition of a property and the formation of several joint ventures that own
the property, in which the Company owns a 90% interest. The joint venture is
accounted for on a consolidated basis, and accordingly, a 10% minority interest
has been reflected relative to this acquisition.
4. Reflects the incremental effects of the disposition or partial
disposition of properties during 1997, based upon the historical operations of
such properties.
5. Reflects the effects of the application of purchase accounting as a
result of the IPO and Formation Transactions, resulting in pro forma expense
adjustments as follows: (i) an increase in depreciation expense of $9,232, (ii)
the reclassification of certain property-related expenses from general and
administrative expense to property operating expense (due to the internalization
of management) of approximately $5,196 and (iii) a net
33
<PAGE> 34
increase in general, administrative and other expenses of $5,958, after
reclassification of property-related expenses. Such changes are based upon
actual expenses incurred during 1997 adjusted for (a) the estimated changes in
costs due to operating as a public entity including investor relations,
accounting and legal fees and other costs related to the internalization of
management and (b) certain reclassifications to reflect the Company's new
organizational structure as a result of the IPO. Estimated depreciation and
amortization has been based upon asset lives of 5 to 40 years.
Also reflects the elimination of advisory fees charged by the Company's
predecessor, AMB, to the owners of the AMB Contributed Properties of $15,521
(excluding approximately $2,027 in real estate acquisition fees paid to AMB
which have been accounted for as acquisition costs by the owners of the AMB
Contributed Properties and accordingly capitalized as investments in real
estate). Also reflects the elimination of investment management and advisory
fees earned by AMB of $28,756 and related expenses of $19,358 resulting from the
change in the Company's operations from an investment manager to a real estate
operating company.
Also reflects an adjustment to historical interest expense to derive 1997
as adjusted interest expense, which is based upon the Operating Partnership's
debt balances as of December 31, 1997. The calculation of 1997 as adjusted
interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, balance of $517,366 (before premium of $18,286),
assumed interest rate of 7.82%........................................ $ 40,458
Credit Facility, balance of $150,000, assumed interest rate of 6.90%.... 10,350
Amortization of debt premium, $18,286 balance, 8 year term.............. (2,924)
Amortization of financing costs, $900 balance, 3 year term.............. 300
Unused Credit Facility fees, unused balance of $350,000, fee of 0.20%... 700
Capitalized interest, average historical construction in process of
$48,303, overall weighted average interest rate of 7.5%............... (3,455)
---------
1997 as adjusted interest expense....................................... $ 45,429
=========
</TABLE>
Also reflects an adjustment to record rental revenues on a straight-line
basis for the Properties from January 1, 1997, the assumed date of acquisition
by the Operating Partnership. Rental income has not been included for any
properties for periods prior to completion of their construction and
availability for occupancy. The pro forma straight-line rent adjustment for the
year ended December 31, 1997 is calculated as the difference between (i) pro
forma straight-line rental revenues of $5,447 and (ii) historical straight-line
rental revenues of $2,992.
Also reflects an adjustment to reflect the incremental effect of
establishing the Operating Partnership's investment in AMB Investment
Management, the income from which is included in interest and other income. The
pro forma operations of AMB Investment Management and the Operating
Partnership's share of AMB Investment Management's net income based upon its 95%
economic interest are as follows:
<TABLE>
<S> <C>
Advisory revenues.................................... $ 5,487
General and administrative expenses.................. (4,465)
Depreciation and amortization........................ (72)
---------
Income before income taxes........................... 950
Income taxes (at assumed effective tax rate of 40%).. (380)
---------
Income before minority interest...................... 570
Minority interest.................................... (17)
---------
Net income........................................... $ 553
---------
Company's share of net income........................ $ 525
=========
</TABLE>
Advisory revenues consist of actual fees earned by AMB for the period from
January 1, 1997 to November 25, 1997 from the assets that are managed by AMB
Investment Management and the actual results of AMB Investment Management for
the period from November 26, 1997 to December 31, 1997.
General and administrative expenses consist of direct costs and indirect
costs allocated to AMB Investment Management by the Operating Partnership. Such
indirect costs have been allocated based upon the percentage of total assets
managed by AMB Investment Management.
34
<PAGE> 35
In addition to its share of AMB Investment Management's net income, the
Company received an acquisition fee for acquisition services provided to AMB
Investment Management in 1997. The pro forma fee for 1997 amounts to $750.
6. The following reflects the incremental effects of properties acquired
subsequent to December 31, 1997 based on the historical operations of such
properties for the periods prior to acquisitions by the Operating Partnership:
<TABLE>
<CAPTION>
REAL ESTATE TAXES REVENUES IN
AND PROPERTY EXCESS OF
RENTAL AND OPERATING CERTAIN
OTHER REVENUES EXPENSES EXPENSES
-------------- ----------------- -----------
<S> <C> <C> <C>
Cascade.................................... $ 1,065 $ (259) $ 806
Wilsonville................................ 2,026 (500) 1,526
Atlanta South Phase II..................... 773 (200) 573
Boston Industrial Portfolio................ 10,403 (802) 9,601
Mansfield Industrial Portfolio............. 343 (12) 331
Orlando Central Park....................... 3,249 (1,069) 2,180
Jamesburg Property......................... 6,774 (2,510) 4,264
Corporate Park Industrial.................. 3,241 (572) 2,669
Minneapolis Industrial Portfolio........... 2,468 (881) 1,587
Houston Service Center..................... 2,739 (965) 1,774
Meadowridge Business Park.................. 4,105 (923) 3,182
Northwest Business Center.................. 1,253 (292) 961
Forbes..................................... -- -- --
Southfield................................. -- -- --
Crysen Corridor Warehouse.................. 536 (113) 423
Garland Industrial Portfolio............... 4,159 (961) 3,198
Suffolk.................................... 655 (221) 434
Minnetonka Industrial Portfolio............ 4,294 (1,622) 2,672
Alsip Industrial........................... 725 (204) 521
Suffolk Industrial......................... 853 (214) 639
Chemway Industrial......................... 1,391 (242) 1,149
Amberjack Portfolio........................ 9,527 (3,142) 6,385
Willow Lake Portfolio...................... 6,268 (1,476) 4,792
Willow Park Portfolio...................... 10,119 (2,213) 7,906
Porete Avenue Warehouse.................... 1,756 (350) 1,406
Mawah Portfolio............................ 4,387 (385) 4,002
National Distribution Portfolio............ 8,680 (1,927) 6,753
South Point Business Park.................. 2,352 (227) 2,125
Northridge................................. 1,332 (534) 798
Totem Lake Malls........................... 2,822 (1,292) 1,530
Around Lenox............................... 1,966 (400) 1,566
--------- --------- ----------
100,261 (24,508) 75,753
========= ========= ==========
</TABLE>
Five of the property acquisitions, Jamesburg Property, Corporate Park
Industrial, Garland Industrial Portfolio, Minnetonka Industrial Portfolio and
South Point Business Park, represent joint ventures with a client of AMB
Investment Management in which the Company owns a controlling 50.0005% interest.
The joint venture acquisitions are accounted for on a consolidated basis and,
accordingly, a minority interest of $5,996 has been reflected relative to these
acquisitions.
Also reflects the acquisition of a non-controlling limited partnership
interest in an existing real estate joint venture which owns the DuPage Elk
Grove Property. As such, the Operating Partnership's share of equity in earnings
of this joint venture of $5,086 is included in interest and other income in the
accompanying pro forma statement of operations.
35
<PAGE> 36
Also reflects estimated incremental depreciation and amortization of the
1998 property acquisitions based on estimated useful lives of 40 years.
7. Reflects an adjustment to derive pro forma interest expense, which is
based upon the pro forma debt balances as of September 30, 1998. The calculation
of pro forma interest expense is as follows:
<TABLE>
<S> <C>
Secured debt, pro forma balance of $737,752 (before premium of
$15,918), assumed interest rate of 7.90%.......................... $ 58,282
Credit Facility, pro forma balance of $154,808, assumed interest
Rate of 6.53%..................................................... 10,109
Senior Debt Securities, pro forma balance of $400,000, weighted
average interest rate of 7.175%................................... 28,700
Amortization of deferred financing costs, $6,434 balance, 3 to 17
year terms........................................................ 990
Amortization of debt premium, $15,918 balance, 8 year term.......... (2,976)
Unused Credit Facility fees, unused pro forma balance of $345,192,
fee of 0.15%...................................................... 518
Capitalized interest, actual amounts capitalized during the period.. (4,118)
---------
Pro forma interest expense.......................................... $ 91,505
=========
</TABLE>
The net change in interest expense is the result of the repayment of
borrowings on the Credit Facility of approximately $394,466 with the net
proceeds from the sale of Senior Debt Securities (see below) and approximately
$267,000 from the sale of Series A Preferred Shares, Series B Preferred Units
and sale of the Series C Preferred Units offset by borrowings on the Credit
Facility related to property acquisitions and the assumption of secured debt in
connection with the property acquisitions.
In June 1998, the Operating Partnership issued $400,000 aggregate principal
amount of unsecured notes ("Senior Debt Securities") in an underwritten public
offering, the net proceeds of $394,466 were contributed to the Operating
Partnership and used to repay amounts outstanding under the Credit Facility. The
Senior Debt Securities mature in June 2008, June 2015 and June 2018 and bear
interest at a weighted average rate of 7.18%.
Also reflects the payment of pro forma Series A Preferred Stock dividends
at a dividend rate of 8.5%, the Series B Preferred Unit distributions as a
distribution rate of 8.625% and Series C Preferred Unit distributions at a
distribution rate of 8.75%.
36
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMB PROPERTY, L.P.
(Registrant)
Date: December 1, 1998 By: /s/ Michael A. Coke
--------------------------- -------------------------------------
Michael A. Coke
Senior Vice President and Director of
Financial Management and Reporting
(Principal Accounting Officer)
37
